The World Bank has projected a 5.6% economic growth in Bangladesh for the current fiscal year. Earlier in April this year, it had projected a 6.2% GDP growth for Bangladesh in the current fiscal year. 

The projection comes from the October update of the Bangladesh Development report by the World Bank, released during a press briefing arranged by the Dhaka office of the global development partner.

Citing the latest statistics by the Bangladesh Bank, the report said the total amount of rescheduled loans, non-performing loans and net written-off loans outstanding in the country reached Tk377,920 crore (approximately $34.4 billion) or 9.5% of FY22 GDP.

Growth is expected to accelerate in FY25 to 5.8%, as inflation would ease and the gradual normalisation of the external sector, it added.

According to the World Bank report, inflation may persist, depending on domestic and global commodity prices. Stabilisation of the external sector depends on removing distortions in exchange rates and lifting exchange rate ceilings.

It has also deemed uncertainty ahead of the national elections as another reason for the decrease in economic growth.

The estimated fiscal deficit widened to 5.3% of GDP in FY23 from 4.6% of GDP in FY22 as expenditure growth outpaced revenue growth, added the World Bank report.

The reinstatement of the price floor on stocks by the Bangladesh Securities and Exchange Commission (BSEC) resulted in reduced trade volumes. Foreign participation in the stock market reached the lowest level in a decade, with substantial withdrawals, the World Bank estimates.

Bangladesh's Current Account Deficit (CAD) narrowed in FY23 to $3.3 billion from $18.6 billion in FY22, supported by resilient export growth and import suppression measures. 

However, the financial account moved into deficit, as trade credit and medium- and long-term borrowing contracted sharply. As a result, the Balance of Payments (BoP) deficit widened to $8.2 billion in FY23, up from $6.7 billion in FY22, the World Bank said. 

The global economy remains in a precarious state amid the protracted effects of the overlapping negative shocks of the pandemic, the Russian invasion of Ukraine, and the sharp tightening of monetary policy to contain high inflation.

The World Bank also projected the global economic growth to slow to 2.1% in calendar year 23, amid continued monetary policy tightening to rein in high inflation, before a tepid recovery to 2.4% in CY24.

Meanwhile, the government has set a GDP growth target of 7.5% for FY24, which is significantly higher than the projections of global multilateral lenders.

The Asian Development Bank (ADB) and the International Monetary Fund (IMF) have forecasted a growth of 6.50% for FY24.

The World Bank suggested some structural reforms to accelerate the economic recovery. These included a market-driven treasury rate and six-month moving average rate of Treasury bills (SMART) to serve as a market proxy, removing interest rate caps to further improve monetary policy transmission and exchange rate flexibility to remove FX distortions and attract inflows through formal channels.

It also suggested reducing tariffs on essential imports to curb inflationary pressure, in line with the new National Tariff Policy.

Saying monetisation of the deficit can contribute to inflationary pressure, the World Bank also suggested strengthening revenue mobilisation as a priority - particularly VAT and Income Tax.

Increased stressed assets and undercapitalised banks necessitate immediate measures to strengthen bank management, and crisis preparedness measures, it added.